31 December 2010 | Angeline Albert
The SM100 survey reveals where procurement professionals will be focusing their efforts in 2011. Angeline Albert examines the results.
Despite the high profile of topics such as stakeholder engagement and sustainable procurement, cost cutting has increased in importance among buyers over the past year, according to the latest SM100 survey.
In the 2010 poll, 38 per cent of purchasers said cost cutting was their main priority. Our latest SM100 found the number citing this as a priority for 2011 had risen to 46 per cent.
For public sector buyers, this was down to government cuts, which the coalition is pursuing to reduce the deficit. Liam Gormley, procurement category specialist for Newcastle City Council, said: “[Cost cutting] is being pushed upon us by the government spending review, and will no doubt be a massive challenge in 2011.
“Other priorities include raising the internal profile of procurement, gaining control of more spend, engaging with stakeholders and suppliers, and collaborative procurement. But these will be prioritised where they directly impact on achieving efficiency savings.”
Cuts were not restricted to the UK, however, as the financial crisis has had an impact worldwide. Colin Fairweather, procurement specialist team leader for New Zealand’s Auckland District Health Board, said: “[The cost-cutting drive] is due to the focus on government spend control requirements and the fiscal reality requiring everyone to work within our constraints.”
But one buyer from the advertising sector, who did not wish to be named, warned that cost cutting did not “mean getting cheap products and services”, but “does mean achieving the lowest possible cost for the right quality and service”.
After cost cutting, the latest survey shows supplier relationship management (SRM), including continuity of supply, is the second most popular priority for 2011, cited by 18 per cent of respondents – up from 17 per cent in the 2010 poll.
Gaining control of more spend areas was third, with 14 per cent making it their chief aim. This is down from 22 per cent in the 2010 poll.
One purchaser from a university consortium who cited this as a top priority believed it could be achieved by improving collaboration with similar organisations.
Increasing outsourcing was chosen by 3 per cent of buyers, down from 5 per cent in 2010.
Sustainable procurement has increased in prominence, but is still not the main priority for buyers. None of the respondents said it was their main aim for 2010, but 4 per cent of purchasers said it was their priority for 2011.
One buyer, who did not wish to be named, highlighted the challenge.
“We are under pressure to make savings yet continue to push the sustainable procurement agenda forward, without necessarily being given access to certain key spend areas.”
Some 10 per cent of purchasers said none of the above was their top priority for 2010 or 2011. Within this group, stakeholder engagement, reducing supplier numbers and securing supply of raw materials were listed as other top priorities.
Martin Wakelin, purchasing director of global elastomers, Trelleborg Sealing Solutions, said: “I feel that in 2011 procurement will face a real challenge with global availability of key raw materials. We are already seeing examples of this in many commodities now, and feel this may well continue.
“The downturn has led many companies to de-stock, so supply chains are even more sensitive to such issues than normal.”
Other buyers also had an eye on recovery this year, as well as the fall-out from the recession. Tom Woodham, consultant at Crimson & Co, said: “To me, SRM is going to be the main priority, as the procurement community has to prepare for the upturn by ensuring that it has the right suppliers in place, and also deal with shortages of supply in some key areas. Both of which are well‑addressed through focusing on your supplier relationships.”
So it seems procurement teams face a challenge in 2011: costs must be cut while managing continuity of supply. It’s going to be a tough year.